The Committee on Trustees plays a crucial role in determining the make-up of all committees, having profiled the Board, based on the strategic plan; cultivated new members based on that profile; and staffed the committees (indirectly) by recommending individual Trustees’ committee service to the Board President. This profiling is especially important in establishing the Finance Committee.
In addition, the Chair of the Finance Committee (or any Board committee) should have the freedom to request that the Board President appoint certain individuals who would strengthen the committee. These might be Board members or not.
The overall goal should be to populate the Finance Committee with four to six individuals, mostly current Trustees. All must understand organizational finance in general and be able to discern the nuances of private-independent school finance. The committee is “staffed” by the school's Business Manager, who provides data, serves as liaison for school operations, and provides finance reports that conform to the committee’s requirements.
Line-item analyses of such reports may not often be necessary, but undertake them periodically for due diligence. Year-to-date reports at every meeting on all revenue and expenses categories are essential, as are regular reports on areas that are finance-critical. (They include cash reserves, debt and debt service, endowment and investments, percent coverage of operations expense with hard income, and current enrollment and projected enrollment as those relate to hard income.)
Finally—and unhappily—there is this reminder: School Heads are almost always educators by background and are seldom qualified to judge the fine points of either finance or of Business Office structure and function. While Heads should pursue professional development to improve their skills in these important areas, the Finance Committee must take the lead.
With all this in mind, you can codify many of the duties and desired characteristics of the Finance Committee in your bylaws. For example:
The Finance Committee shall be composed of not less than five or more than seven appointed members, most of whom are Trustees. The committee shall review annual operating and capital budgets prepared and presented under the School Head’s direction, and make recommendations to the Board of Trustees. It shall review major financial and property transactions not provided for in the budget and submit proposed variances with recommendations to the Board of Trustees.
The Finance Committee shall be in charge of investing all school funds, including the power to effect purchases. The Finance Committee will initiate the sale and exchange of securities and other school investment assets, except real property. The committee may employ investment counsel and delegate authority to buy or sell securities for the school’s account to such investment counsel or any school officer, subject to such limits the committee may impose. The committee shall report changes and investments to the Board at each Board meeting.
The school Treasurer shall be Chair of the Finance Committee, and the Business Manager shall serve as an ex officio committee member, without the power to vote.
The Finance Committee must bring to its relationship with the Business Manager a perspective that is simultaneously supportive and critical. Ask hard questions. Supply relevant evidence. There is no more obvious and critical Board-level function than “fiduciary responsibility.”
Additional ISM resources:
The Source for Trustees Vol. 14 No. 5 Forming the Finance Committee
The Source for Trustees Vol. 13 No. 7 Reports to and From the Finance Committee
Additional ISM resources for members:
I&P Vol. 41 No. 8 The Board’s Fiduciary Responsibility: The Audit Committee and the Finance Committee
I&P Vol. 37 No. 3 Elements of a Sound Investment Policy
